I was very fortunate to have the opportunity to hear Marc Tarpenning, cofounder of Tesla, speak at the beginning of this quarter. It was the most exciting and impactful talk I’ve attended at Stanford thus far. This is really saying something.
In his talk, Tarpenning elucidated a theory of innovation and disruption that feels to me to have been “lost to time.” It is a measured, idea-first strategy that is totally foreign to the current generation of startups and to a world in which “founder” is itself a career.
Sara Singer condensed his theory into a wonderful diagram that I have further developed into the following list (broad principles are bolded, with the specific examples from Tarpenning’s time at Tesla in the normal weight):
- Identify a real problem. Prove it exists with real-world data. Narrow down your search area by taking the age-old wisdom seriously: “if something can’t go on forever, it won’t.” Create the solution that will replace it. At Tesla, Marc and his cofounder Martin Eberhard wanted to help solve the issue of climate change. The DoE projected in 2008 that over 70% of U.S. oil demand came from the transportation sector, and others have calculated that decarbonizing road transportation “could feasibly reduce global emissions by 11.9%” (The Carbon Almanac, pp. 67). Without any action, climate change would end the world. The scenario they identified thus fits the above model—a problem that exists and a solution that must arrive eventually. So they set out to build a car without emissions.
- Evaluate your solutions. Prove that it will work, mathematically, before you start building. Your product cannot be better along just a single-axis if you want to change people’s behavior; make a Pareto improvement. Do the hardest thing first to learn if your solution is possible. Marc and Martin evaluated two things: the technology and the market. First, they exhaustively investigated possible power sources before deciding that batteries had reached the right power density and mass-producibility to be—provably—the most effective alternative to gasoline. Even powered by coal generators, an electric car is less polluting per mile than an ICE vehicle due to the efficiency of the electric motor (significantly less energy wasted as heat, thus more energy toward movement). On the market front, they found that upper-class Americans were seeking out environmentally-friendly vehicles as a status symbol—with the Prius eating into Lexus sales, and GM having to physically claw back their EV1 from leasers. Without scale, their first car would be expensive, but it being the only vehicle to truly satisfy this niche meant if the tech worked they would find buyers. Finally, their solution wasn’t just technically better for customers with its radical efficiency: it was fun, sexy. The rise of electric cars has made them feel normal, but Tarpenning described the “electric smile,” a meme they threw around at Tesla in the early days to describe the reaction that drivers had from the very first moment they pressed the pedal and felt the instant torque.
- Change the world. The shape of progress is not inevitable, we make it. Success is assured only in retrospect. Tarpenning advocated for a goal of “sustainable abundance,” forged from a fusion of technological advancement, government buy-in, and behavioral change.
A lot of software businesses have none of these qualities.